The strategy analysis of Wal-Mart
The background of Wa lmart
1962, Sam Walton who was the founder and opened the company’s first discount store in Rogers. Ark City .
1969, The company officially incorporated as Wal-Mart Stores Inc. on October 31. The 1970, marked the beginning of significant growth for the company. The first year of that decade saw the opening of the first Walmart distribution center.
The 1972, after being approved and listed on the New York Stock Exchange, Walmart stock split 100 percent for a second time, with a market price of $47.50.
The 1983,the first Sam’s Club opened in Midwest City Okla. The same year, Walmart opened stores in Indiana, Iowa, New Mexico and North Carolina.
The 1990,Walmart became the nation’s No. 1 retailer , entering into California, Nevada, North
Dakota, Pennsylvania, South Dakota, and Utah and acquiring the McLane Company of Temple, Texas.
Branching out further in 1991, Walmart stepped into the international market with the opening of a retail unit in Mexico City.
On April 5, 1992, Sam Walton passed away at the age of 74. Just weeks before, President George H.W. Bush presented him with the Medal of Freedom, the nation’s highest civilian honor, during a ceremony at Walmart headquarters.
The year of 1997,Walmart became the largest private employer in the United States with 680,000 associates, plus an additional 115,000 international associates. Walmart also replaced Woolworth on the Dow Jones Industrial Average, and the company introduced OneSource nutrition centers
At the year of 2000, Walmart entered the new millennium with the appointment of H. Lee Scott Jr. as the third CEO of Wal-Mart Stores Inc. in 2000. That year, Fortune magazine ranked the company fifth in its "Global Most Admired All-Stars" list and named Walmart the third most admired company in America.
As of 2005, Walmart employed more than 1.6 million associates in more than 6,200 facilities around the world – including 3,800 U.S. stores and 3,800 international units – with $312.4 billion
in sales for the year.
The company served more than 138 million weekly customers in the United States, Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Germany, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, South Korea and the United Kingdom. View the current unit count for each country.
On April 10, 2008, Sam's Club celebrated its 25th anniversary. In 2008, Sam's Club operated more than 590 locations nationwide and more than 100 locations internationally.
The year of 2009, Mike Duke succeeded Lee Scott as president and chief executive officer, effective February 1, 2009. Duke was also elected to the company’s board of directors. Scott
continues serving as chairman of the executive committee of the board. The board also approved the promotion of Eduardo Castro-Wright to vice chairman of Walmart.
Doug McMillon is promoted to president and chief executive officer of Walmart International, the company ’ s second largest operating segment.
Question A Part A The characterize of Wal-Mart’s strategy
Traditionally, War-Mart has essentially had a low-cost, high volume strategy. The strategy aims at customer satisfaction through low prices and relatively goods customer service. Here are the basic details.
The characterize of Wal-Mart’s strategy
Low cost: Wal-Mart has lower operating expenses than the industry average. The primary cost advantage is Wal-Mart’s superior distribution capability(location of stores, inside-out growth
patterns, cross-docking, superior information management).
Low price is always the Wal-mart’s core strategy.
High Volume: Industry analysts watch Wal-Mart’s growth of sales figure very closely. Wal-Mart’s
prices are low by the industry standard, which, combined with its lower costs, indicates a strategy that aims at growth in volume through grabbing increased market share.
Customer Satisfaction: Low prices, advanced data management and extremely motivated
employees means a better customer experience than at other discount retailers, even though Wal-Mart remains a self-service retailer. In addition, the large size of the traditional Wal-Mart stores adds convenience by offering a one-stop solution by offering a wide range of products. “ALWAYS LOW PRICES.” or “EDLP”(Everyday Low Price).That is Wal-Mart’s slogan and its
business model, low price enable by operating efficiently and buying power. The low price was made from the economies of scale, therefore, Wal-Mart could decrease the purchasing cost and decrease goods price.
Wal-Mart is the largest retail enterprise all of theworld, it always on the top of the “World Top
500”.There was $3600,000,000,000 annual business turnover Now, more than 5500 branches all around the world.
The generic strategies of company employing
Staff welfare policy ,Profit sharing,Employee buy stock,A 401(k) plan,Dismiss interview system ,Others,Paid vacation and holidays, Stock ownership/stock loan program, Competitive wages, A discount card, Medical and dental coverage ,Life insurance, Accidental death and dismemberment coverage ,Short- and long-term disability insurance ,Free confidential professional counseling and assistance ,Scholarship bonuses ,Child-care discounts.
The policy that inspired resignation on the management layer
The card one ,The spirit of grass roots
The card two ,Skillful staff
The chief components of its strategy
Core idea : always low price
The low price comes from the low cost. Absolutely cost in the first flight.
The essence of Wal-Mart is: to makes the principle of modern industry and production use of in the business, and focusing on achieved standardization of business(goods, services, the name of store, face of store and so on), specialization of business(the purchasing, distribution, selling and management, these functions must take these apart ) and simplification(to make simple and normative business activities on each business each terms and positions). Thereby, to achieved the purpose that scale effect.
Management Strategy (Making)
Direction strategy It focuses on one industry and growth style.Always on the retailing chain-store operations and supermarket.Convergence Vertical growth horizontal growth
Functional strategy The core power of Wal-Mart good idea of operation and culture. Low revenue but much more sales
Strive for Excellence and swim upstream
Respect for the Individual
Pay attention to long-term benefit
Low revenue but much more sales
Target market aimed in the low and middle income groups.
Just gained the half of profit what they can gain, makes the half other one to attracted the more than 3 times customers.
Every day low price
More economy than competitors forever
Warehousing and Distibution
A big part of distribution of the suppliers products are handled by Wal-Mart and 80 percent of the purchases are directly shipped in the Warehouse. And still the Wal-Mart is continuously upgrading its distribution system wherein the products that arrive via the inbound trucks were loaded and unloaded on outbound trucks without sitting first in the inventory of the warehouse.
Strive for Excellence
Innovation of technology
For example: Activity invested in the retail information. It first used the computer tracked the inventory (1969), the first used the bar code
(1980), the first used the EDI(Electronic Data Interchange ),(1985)
The fist used the telxon/datalogic(1988)
Innovation of management
local touch at the abroad
Researching new retail models to suit for customer’s new demand.
Rule No.1 ,Customer is right forever Rule No.2 ,If you doubted inside yourself , Refer to the No.1 please Sundown rule, today’s job must finished in today. The commodity inspection system, be sure the high
goods quality And others
Respect for the Individual
company employees not called “staff”, they are called “copartner” or “associate”.
Managers and staffs they are the associate relationship , and there are no discriminate anymore, they shoulder the responsibility of company together.
Focus on long-term benefit
Walmart win the competitors through build customers loyalty ,and maintains the long-term relationship with Copartners.
According to the market demand, Wal-Mart participated into the producing planning of upriver manufacturers.
Therefore it could first own the goods which the market needs.
Expanding strategy From country to city Most of retail company enter in chose the business center of city, but Wal-mart chose from the country to the city, before it enter in city, to the best of it’s
ability satisfied each markets’ demand.
The four styles of retail
1 Wal-Mart low price marketplace Starting time:1962 Scale: 40,000-125,000 sq.ft Employee:150 sort of commodities:80,000 To issues all kinds of high quality goods and services and convenient shopping environment.
2 Wal-Mart supermarket Starting time:1988 24hours open Scale 109,000-230,000 sq.ft Employee
Sort of 100,000 commodities and sort of 30,000 food goods.
3 Sam’s Club Starting time 1983, Scale 110,000-130,000 Employee 125
Sort of commodity 4,000 Membership fee( normal $30/year, firm $35/year) People can buy the commodities which can’t be substitute under the most preferential price Primary issues the PC, furniture, TV, cloth and the like.
4 Neighborhood Market
Starting time1998, Scale 42,000-55,000 sq.ft Employee 80-100 sort of commodities:28,000 To issued the medical and general cargo, vegetable, cooked foods, flesh, milk, and the like.
Example 1 Buy made in U.S
Advertising message: we will try our best to selling American
products anywhere and anytime, we believe you will do it.
Example 2 Green policy Wal-mart taken the initiative for green activity.
Animal Welfare;Wal-Mart supports the animal welfare guidelines released by the Food Marketing Institute (FMI). American Flag;we display the flag at all Wal-Mart stores and Supercenters. Case-Ready Meat;With case-ready fresh meat, products will arrive in Wal-Mart Supercenters already packaged and ready for our customers. Conflict Diamonds;We strongly believe that
purchasing and selling "conflict diamonds" -that is, diamonds used to fund civil wars in numerous countries -is a direct violation of our ethical policies. Revision to Gun Policy -June 2002.;NICS
Hiring Older Workers .
The company covered most of the US market and having a huge market share.
Walmart offer variety of products in their stores
It sells 40% of private brands which are produced through contracts with manufactures.
High customer satisfaction.
The SAMs Club customers are able to buy the products in bulk quantity and getting the advantage of low prices.
A Wal-Mart super store offers non stop shopping for their customers.
Satisfaction guaranteed programs promoting customer goodwill
Buy from local merchants when possible
Stock ownership and profit-sharing with employees
The Corporation is huge but still has presence in 14 countries.
Customers sometimes are curious about the quality of products.
Keep poor performance employees on hand.
The market share is low outside the US market.
Supplier profit margin is very low
Most of the International Market are untapped specially the Asian Countries.
Joint ventures to increase market share in international market.
The inflation in US market diverts the customer from buying expensive products towards cheap products.
A lot of retail organizations are leaving out of business due to the drop in disposable incomes. This can help Wal-mart by growing its customer base due to the bargains that it can provide its customers.
Due to the cheap rate that the organization is able to buy its products from suppliers, it is able to provide customers with even better bargains to give confidence them to shop at Wal-mart.
Regulation of Wal-Mart pharmacies
Small towns do not want entry of Wal-Mart
Bad media exposure for Kathie Lee Brand
Variety of competition nationally, regionally and locally
Substitute products more easily because of intense competition
Wal-Mart is criticized several times by community groups.
The competitors are gaining control over International Market.
Being a worldwide retailer means that you are uncovered to
political troubles in the countries that you operate in.
This small town is the world headquarters for the world's largest company (Walmart surpassed General Motors in sales in 2001)Corporate offices are on the commercial strip on the edge of town, while the original Walton's Five and Dime on the town square, where Sam Walton started u, is preserved as a public visitor's center forthe company.
The Wal-Mart Culture
Wal-Mart Stores, Inc. was founded on principles developed by Sam Walton. These principles carried out every day by hard-working and friendly associates have created a unique corporate culture that is key to Wal-Mart's competitive edge. The basic beliefs guiding Wal-Mart Stores, Inc. are:
Three Basic Beliefs Respect for the Individual
Every associate's opinion is respected. Managers are considered "servant leaders" who help new associates realize their potential through training, praise and constructive feedback. An "open door" management philosophy encourages associates to raise questions and concerns in an open atmosphere.
Service to the Customer
The customer is the boss. Everything possible is done to make shopping at Wal-Mart and SAM'S CLUB a friendly, pleasant experience. The "Ten-Foot Attitude" means that associates are to greet each person they see. The "Satisfaction Guaranteed" refund and exchange policy allows customers to be fully confident of Wal-Mart and SAM'S CLUB's merchandise and quality.
Strive for Excellence
Wal-Mart and SAM'S CLUB associates share an exceptional commitment to customer satisfaction. At the start of each day, store associates gather for the Wal-Mart or SAM'S CLUB cheer and review sales from the previous day, as well as discuss their daily goals. "The Sundown Rule" requires a continual sense of urgency, with questions asked in the morning answered before the end of the day.
Another cultures Open Door
Our management believes open communication is critical to understanding and meeting our associates’ and our customers’ needs. Associates can trust and rely on the open door; it's one of the most important parts of our culture
Observing the Sundown Rule means we do our best to answer requests by the close of business on the day we receive them. Whether it's a request from a store across the country or a call from down the hall, we do our very best to give each other and our customers same-day service. We do this by combining our efforts and depending upon each other to get things done.
The 10-foot Rule is one of our secrets to customer service. During his many store visits, Sam Walton encouraged associates (employees) to take this pledge with him: "I promise that whenever I come within 10 feet of a customer, I will look him in the eye, greet him, and ask if I can help him."
Sam Walton believed that effective leaders do not lead from behind their desks. "It's more important than ever that we develop leaders who are servants, who listen to their partners – their
associates – in a way that creates wonderful morale to help the whole team accomplish an overall goal,” Sam said.
Sam Walton, our founder, believed in the power of teamwork. As our stores grow and the pace of modern life quickens, that philosophy of teamwork has only become more important over the years
Don't be surprised if you hear our associates shouting this enthusiastically at your local Walmart store. It's our cheer, and while it might not sound serious, we take it seriously. It's one way we show pride in our company.
Bentonoville was the original place, the enterprise’s culture has been become to adult, Actually, although War-mart was not asked suppliers opened the office in the town, more and more higher competition of environment, there were lots of American suppliers collected in the near of the town and opened theirs’ office. Therefore, they were able to negotiated with Wal-Mart on R&D of
products, transportation, and quality control and the like.
The scale of these office from the family to company which more than 100 persons, such as Proctor-Gamble, it established a team which more than 300 people at the town for servicing Wal-mart, but there were some company office only one person even part-time job at there. These local workers whom work for their suppliers were called “The Sales Representative”. Most of them had worked for Wal-mart, they know the operating process of supermarket, therefore, the suppliers were able to know the fresh news from local workers and then, the chance coming. This is why the culture seem to be so much stronger in Bentoville than out in the stores.
Five-Year Plan (2005)
Next year alone Wal-Mart plans to add 250 more Supercenters, but that's just the beginning. In a presentation to shareholders in 2005, Wal-Mart CFO Tom Schoewe said there is room for 4,000 additional Super Centers in the U.S. market. And this insatiable pursuit of growth extends around the world. In China, for example, Wal-Mart plans to grow 30 to 50 percent in square footage each year for the foreseeable future, according to the Wall Street Journal.
Company executives are boastful about Wal-Mart's great leap forward while never pausing to consider the consequences of their expansion. Wal-Mart CEO Lee Scott told the Chicago Tribune earlier this year, "When you get as large as we are, you have to paint a picture in people's minds that you can still grow. Otherwise they think of $285 billion and think 'That's the end of that.' Well it isn't. It's not even the start of it. We have a five-year plan, and have a pretty good idea in five years where we'll be."
(3)There are some barricade from government, Wal-Mart China haven’t build the GPS for global
purchasing, transportation and distribution
Another abroad market
Example: Thailand, Russia, and Australia and so on
(1)To cooperated big network company for online shopping such as Amazon, eBay, alibaba (阿里
(2)To established the relationship with MAERSK, UPS, FedEx, Panalpian and so on for international logistics.
To enhanced the public image. Increasing investment on public service
3. To find out the new management talent
4. Maintain the goods quality, increasing the service.
5. To try the new expanding strategy
“From countries to city” and “Expanding from city”